Friday October 8, 2010 - 02:51:16 GMT
Forex Hound - www.forexhound.com
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Commodity, Equity Bulls Pare Positions ahead of Friday’s Non-Farm Payrolls Report
Commodity and equity traders pared long positions on
Thursday ahead of Friday’s U.S. Non-Farm Payrolls Report. Traders appeared to
be taking no chances that the report will come out better than expected,
leading perhaps to the Fed cutting back on the amount of quantitative easing it
is currently considering.
There is no question that the market has built long
positions in commodity and equity markets, banking on the start of another
round of asset buying by the U.S. Federal Reserve. The question remains,
however, is how big will these purchases be.
Friday’s U.S.
employment data will offer traders a clue as to how much the Fed may have to
increase the assets on its balance sheet.
Economists are looking for the September Non-Farm Payrolls
report to show that the labor market is languishing. Wednesday’s
weaker-than-expected ADP employment report indicated that the labor market
could be contracting. Employers may not be firing a lot, they certainly aren’t
hiring.
Total non-farm payrolls are expected to fall by 8,000 –
10,000 in September. The government continues to release more temporary Census
worker jobs than are being created by the private sector.
The most important number to watch is private-sector hiring.
Economists are forecasting an increase of about 85,000 jobs.
On Thursday, many markets including December Gold, December
Silver and November Crude Oil formed closing price reversal tops. The
higher-high, lower closes in these markets were most likely profit-taking and
position paring.
In my opinion, if today’s action was a change in trend or an
asset allocation move, the Treasury Bonds and Notes would have gone through the
roof. Today’s action was basically long investors trading in the hottest
trending markets cutting back on speculative positions and taking some of the
weaker longs down along with them.
A better than expected NFP number on Friday is likely to
lead to more position paring in the commodity markets. A worse than expected
report will be bad for the Dollar, leading to a jump in currencies and precious
metals. Stocks could see a two-sided trade no matter which way the number comes
out.
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